Loss of child benefit will affect the size of home loans
Once again, lenders have found another way to tighten the noose on lending. With the reduction and loss of the child benefit for more than a million households due to changes that took effect in January, lenders are warning that the size of available home loans may be reduced as much as 80%. This will also affect homeowners looking to switch mortgage products after their initial introductory ARM loan rate expires.
This news comes on top of the rising costs of raising a child. According to insurer LV=, childcare costs are one of the main reasons for the increase. Childcare costs have increased by over 60% in the last decade.
This puts yet another major obstacle toward family home ownership. Despite efforts by the government to stimulate sales and lending, such as the Funding for Lending and NewBuy schemes, the mortgage industry continues to find new ways to frustrate potential new property owners.
The continual impediments to home buying, coupled with rising rents, may force young couples to delay starting families. My advice to young people looking to get an early jump on the property ladder is to continue living with your parents until you have secured the deposit needed on a home of your own. Renting in the current market will put a serious crimp in your ability to save. Patience indeed is a virtue when it comes to the property market.
For those who cannot wait, get your parents involved in coming up with the deposit. Put down as much as you can to keep mortgage payments low in the event of unemployment, injury, illness or some other unfortunate circumstance. Repayment can occur either on a monthly basis (be sure that the terms are realistic), or upon sale of the property. The Bank of Mum and Dad will likely offer more favourable terms than your traditional lending institution.